New York Manufacturing Gauge Jumps to Highest Level in More Than Four Years

New York State manufacturing activity strengthened sharply in August, with the Federal Reserve Bank of New York’s headline Empire State Manufacturing Survey index rising five points to 20.6, its highest reading in more than four years. Orders, employment and the outlook remained positive, but the report also showed faster growth in input costs and worsening supply conditions.

The rebound adds to signs that the factory sector has entered the second half of 2026 with better demand than it had a year ago. It does not, however, amount to a nationwide manufacturing reading. The Empire State survey measures conditions reported by manufacturers in New York State, and its monthly diffusion indexes can move sharply from one release to the next.

The New York Fed said the August survey was based on 97 observations collected between August 3 and August 10. In the headline measure, 43.8% of respondents reported better general business conditions than in July, compared with 23.1% reporting worse conditions. That produced the seasonally adjusted 20.6 index reading, up from 15.6 in July.

Orders, backlogs and employment stayed in expansion

The details were broadly consistent with continued growth. The new orders index was 17.3 and the shipments index was 11.7. Both remained clearly positive, even though each fell from its July reading. The combination suggests that demand and goods movement were still increasing, but not at the same pace as the previous month.

Backlogs strengthened more noticeably. The unfilled orders index rose to 15.5 from 5.0, indicating that more firms reported growing order books that had not yet been completed. The delivery-times index climbed to 20.6 from 13.0, a sign that deliveries were taking longer. Inventories, by contrast, moved into contraction territory, with that index falling to negative 5.2 from 4.0.

Employment indicators also stayed positive. The number-of-employees index came in at 9.3, down slightly from 11.4 in July, and the average-workweek index increased to 6.9 from 2.8. Those readings point to continued, modest increases in both factory headcount and hours worked among New York respondents.

The August improvement also extends a recovery that has been uneven rather than linear. The same headline index reached 19.6 in May, then fell to 5.7 in June before rising to 15.6 in July and 20.6 in August. That volatility is one reason a single regional survey is more useful as an early signal than as a stand-alone verdict on the U.S. factory economy.

Input costs accelerated as supply conditions worsened

The most cautionary part of the August report was the price and supply picture. The prices-paid index rose 6.3 points to 58.6, meaning the share of firms reporting higher input prices substantially exceeded the share reporting lower prices. The prices-received index moved the other way, dropping 4.9 points to 22.7, but it remained positive and therefore continued to indicate rising selling prices overall.

That combination matters because it suggests manufacturers were still facing meaningful cost pressure even as their ability or willingness to raise selling prices cooled for a second month. The Empire State price indexes are not measures of the inflation rate, and they should not be read as a direct forecast for the Consumer Price Index or the Federal Reserve’s preferred personal consumption expenditures price index. They show the breadth of firms reporting higher or lower prices, not the size of the price changes.

Supply indicators reinforced the cost concern. The supply-availability index fell to negative 13.4 from negative 10.0, meaning availability worsened for more firms than it improved. Delivery times lengthened further, and inventories declined. Those results are consistent with a factory environment in which stronger demand is running alongside tighter supply conditions.

There is a similar, though separately measured, pattern in the national Institute for Supply Management data. ISM’s July U.S. Manufacturing PMI rose to 55.6, its highest level since May 2022, with new orders, production and employment in expansion territory. Its Prices Index remained high at 71.1, and supplier deliveries slowed for an eighth consecutive month. The two surveys use different samples, scales and methodologies, so their index levels should not be compared directly, but both point to stronger activity accompanied by persistent input-cost and supply pressure.

The Empire State gauge is regional, not a national factory index

The distinction is important for investors assessing the economic outlook. The New York Fed survey is sent each month to a recurring pool of about 200 manufacturing executives in New York State, typically receiving around 100 responses. Respondents come from a range of industries across the state, and the headline general business conditions index is based on a direct survey question rather than being calculated as a weighted average of the other component indexes.

A positive Empire State reading means more firms reported improvement than deterioration. It does not mean New York factory output rose by 20.6%, nor does it imply U.S. manufacturing output grew by that amount. The survey can provide an early read on business conditions, orders, labor, prices and supply chains, but national manufacturing conditions are better judged from broader measures such as ISM’s U.S. survey and the Federal Reserve Board’s industrial production data.

The latest Federal Reserve industrial production report available before Monday’s Empire State release covered June. It showed manufacturing output was unchanged that month, although factory output rose at a 4.7% annual rate during the second quarter. Manufacturing capacity utilization was 75.7%, which remained below its long-run average. The Board is scheduled to release July industrial production data on August 18, giving investors a nationwide output measure one day after the New York survey.

New York manufacturers themselves remained constructive about the next six months. The future business conditions index rose to 32.1 from 27.9. Firms expected new orders and shipments to increase significantly, and the future employment index jumped to 28.2. The same respondents also expected supply availability to worsen and price increases to stay elevated, while capital spending plans remained modest.

For the Federal Reserve outlook, that mix is more informative than the headline alone. August brought a stronger regional growth signal, but not a clean disinflation signal. The next national industrial production report will show whether the stronger tone seen in recent business surveys is also appearing in actual U.S. factory output.